What Determines Residential Construction Prices?
Instead of buying an existing home, you choose the route of custom build to avoid combing through limited inventory and bidding wars. And although the result will be the home of your dreams, you’re left wide awake at night wondering what details influence the numbers following the dollar sign.
Labor costs, location, and quality of materials will determine your bottom dollar. Does one category influence more than the rest?
Location, Location, Location
It’s no surprise that where you choose to settle down will largely impact the final price, California being one of the most expensive markets in the United States. For example, a house planted in the rolling hills of Austin, Texas, that costs about $500,000 might cost closer to $1,200,000 in Los Angeles.
The construction cost per square foot for a California residence ranges anywhere from $400 to $600. The material used for floors, walls, ceiling and roof, internal fixtures, sanitary fittings, and amenities will determine how far the pendulum swings in either direction.
Quality of Materials
According to Home Advisor, the cost of building materials will account for anywhere from 30 to 50% of your total expenditures. Depending on whether you spend $50 on ceramic tile for a small area in your entryway to $500 on natural stone for your foyer, the materials you select will reflect your home’s beauty, durability, and worth.
With inflation and a supply shortage at the forefront of our minds, it’s safe to assume that the cost of most building materials has increased. Siding, for example, experienced a five to ten percent increase this past year alone. Similarly, sawmills slowed production with the onset of the pandemic, anticipating reduced demand. But demand remained strong, and lumber mills couldn’t meet expectations. As a result, lumber prices have tripled. All of this data points to the necessity of having seasoned contractors that know how to maintain quality and durability with your budget in mind.
Labor Costs
Labor costs account for nearly 30 to 60% of your total budget. Of course, these depend on the size and complexity of your house and your contractor’s ability to secure fair-priced labor and materials.
Keep in mind that contractors aren’t the only ones seeing the project through. Architects, engineers, and electricians may be involved, each with its own fees. For example, landscaping may cost $70-$150 hourly, while roofing hovers around $5,000-$10,000 in total.
Economic Factors
Most importantly, the final cost ultimately depends on the economy. The beginning of 2022 presented record inflation levels—between 5.5 and 7% compared to a “healthy” 2%. Additionally, a tight labor market, a jump in the 30-year fixed mortgage rate, fluctuating building material costs, and supply chain issues remain significant concerns for the housing market.
Why You Should Hire Burge Construction
Perhaps the smartest thing you can do when building the home of your dreams is to hire a prominent, well-established construction company. Burge Construction is approaching fifty years in business—five decades of elegant builds and strategic decisions to keep your budget in mind.
Whether you’re building a million-dollar home in Orange County, or a second home in Joshua Tree, we’re your best advocates. Give us a call today at (949) 492-1175.